We’re conflicted about this article.  On one hand we understand quite well.  Thanks to regulatory requirements we have a treasure trove of archived e-mails.  We too were overwhelmed with fearful clients pounding the table to sell.  The best (or worst?) example is a panicked client who e-mailed us on March 6, 2009 (the S&P 500’s trough) who we had to talk out of locking in losses at depressed and artificially low prices.  That same client today swears this never happened.  E-mails lie?  Interesting.

On the other hand we’re perplexed by the article.  It suggests investors are (un)intentionally forgetful of the fact that markets can and do decline and as a result are assuming greater levels of risk.  While this is true in some instances we have seen many of our clients doing just the opposite.  In fact we’ve spent the better part of the last few years pushing clients to not pile cash under their mattresses.  Despite rising equity prices we’ve had a tough time convincing some clients markets can and do go up too.  And those folks piling into the (perceived) safety of bonds?  Kiss that principal goodbye when interest rates rise.

In the end neither approach works well for most investors (keeping in mind investing is not the end but a means to it).  What has and always will work is a balanced approach – cash for liquidity needs, fixed income for cash flow and volatility purposes and equity for long-term inflation-fighting returns.

That said the article raises an excellent point.  Human nature for better or worse allows us to have short memories.  Those of us with the best chance of reaching our life goals keep our emotions in check.  The rest of us are doomed to repeat the past as we alter or erase our memories as some sort of emotional bandage.

Oh to be human…